The Debts of Overseas Governments (Determination of Relevant Percentage) Regulations 1990

• Citation: S.I. 1990/2529
• Sections: 8

Section 1 Citation and commencement

These Regulations may be cited as the Debts of Overseas Governments (Determination of Relevant Percentage) Regulations 1990 and shall come into force on 11th December 1990.

Section 2 Interpretation

(1) In these Regulations, unless the context otherwise requires–

“the A, B and C factors” mean the factors so described in Schedule 1 to these Regulations;

“debt” means a debt to which section 88A(2) of the Income and Corporation Taxes Act 1988 applies;

“overseas State authority” has the same meaning as in section 88A(4) of the Income and Corporation Taxes Act 1988;

“the principal section” means section 88B of the Income and Corporation Taxes Act 1988.

(2) For the purposes of these Regulations a debt is connected with a State or territory–

(a) in the case of a debt which is owed by, or payment of which is guaranteed by, an overseas State authority, when it is the State or territory by reference to which the overseas State authority is an overseas State authority; and

(b) in the case of a debt due payment of which is or may be prevented, restricted or subject to conditions–

(i) by virtue of any law of a State or other territory outside the United Kingdom or any act of an overseas State authority, or

(ii) under any agreement entered into in consequence or anticipation of such a law or act,

when it is the State or territory whose law it is or by reference to which the overseas State authority is an overseas State authority.

Section 3 Determination of relevant percentage

(1) This regulation provides for the determination of the percentage of a debt by reference to the position at the end of a period of account of a company for the purposes of subsections (2) and (3) of the principal section.

(2) Subject to paragraph (4), the percentage referred to in paragraph (1) shall be that given by Schedule 2 to these Regulations as corresponding to the number which is found by–

(a) aggregating the numerical values (as adjusted where necessary in accordance with paragraph (5)) attributed by Schedule 1 to these Regulations to such of the A, B and C factors as are applicable at the end of the period of account in question in the case of the State or territory with which the debt is connected,

(b) aggregating the values (as so adjusted) attributed to such of those factors as are so applicable at the end of each of the four consecutive periods of three months which end with the period ending three months before the end of the period of account in question, and

(c) calculating the figure which results from dividing the aggregate of the values at the end of each of the periods referred to in sub-paragraphs (a) and (b) by the number of those periods and, if that figure is not a whole number, rounding it up to the next whole number.

(3) Paragraph (4) applies where–

(a) at the end of a period of account of a company, or

(b) at the end of one of the four consecutive periods of three months which end with the period of three months before the end of a period of account of a company,

(in paragraph (4) referred to as “the attributed value date”) it is found that a numerical value of ten or more is attributed for the first time by Schedule 1 to these Regulations in the case of the State or territory with which the debt is connected.

(4) Where this paragraph applies–

(a) for the purposes of the aggregation required by paragraph (2)(b) only those values shall be taken into account which are attributed to factors which are applicable in the case of the State or territory in question at the end of the consecutive periods of three months ending on or after the first attributed value date, and

(b) for the purposes of the calculation required by paragraph (2)(c) only those periods shall be taken into account which end on or after the first attributed value date.

(5) Where the aggregated numerical values attributed by Schedule 1 to these Regulations to such of the A, B and C factors as are applicable at the end of a period are less than 15, those values shall be adjusted by attributing to the C factors one half of the numerical values attributed by that Schedule in place of the values actually so attributed.

Section 4 Transitional provisions

(1) In relation to the last period of account of a company ending before 20th March 1990, in regulation 3(2) sub-paragraphs (b) and (c) shall be omitted.

(2) In relation to periods of account of the company–

(a) ending on or after 20th March 1990 and before 20th June 1990, in regulation 3(2)(b) the words “each of the four consecutive periods of three months which end with” shall be omitted;

(b) ending on or after 20th June 1990 and before 20th September 1990, in regulation 3(2)(b) for the word “four” there shall be substituted the word “two”;

(c) ending on or after 20th September 1990 and before 20th December 1990, in regulation 3(2)(b) for the word “four” there shall be substituted the word “three”.

(3) Where, in relation to a period of account of the company, regulation 3(2) applies as modified by paragraph (1) or (2), regulation 3(4) shall have effect as if the references in that paragraph to paragraph (2)(b) and (c) were to those sub-paragraphs as so modified.

Section 1

(1) In this Schedule–

“arrears” in relation to repayment of debt, or the payment of interest on debt, do not include arrears arising out of temporary administrative delay which are expected to be corrected within a reasonable period of time and “in arrear” shall be construed accordingly;

“external creditor” in relation to a debt, means a creditor which is an international financial institution, an overseas State authority (other than one which is an overseas State authority by reference to the State or territory with which the debt is connected) and any other creditor who is resident outside the State or territory by reference to which section 88A(2) of the Income and Corporation Taxes Act 1988 applies to the debt;

“international financial institution” means the International Monetary Fund, the World Bank, the International Bank for Reconstruction and Development, the International Development Agency, the International Finance Corporation and any regional development bank;

“regional development bank” means any of the European Investment Bank, the African Development Bank, the Asian Development Bank, the Caribbean Development Bank, the Inter-American Development Bank, and any other investment or development bank constituted by international agreement which is for the time being specified in Schedule 2 to the Banking Act 1987 .

(2) References in this Schedule–

(a) to the relevant date are references to the end of any period of account or period of three months at which the applicability of the A, B and C factors is in question for the purposes of determining a percentage under these Regulations;

(b) to an agreement to reschedule or restructure obligations do not include an agreement by a State or territory to make repayment of debt and payment of outstanding interest in full at an earlier date than the due date or to make future such repayments or payments by reference to earlier dates than the due dates;

(c) to the figures for the latest available period and at the latest available date are respectively to the figures for the latest period of twelve months ending before the relevant date for which figures are available and to the figures at the latest date before the relevant date for which figures are available.

Section 2

The A factors in the case of a State or territory, which are factors which show the inability or unwillingness of the State or territory to meet its obligations when they are due or thereafter, and the numerical values attributable to them are those given by Table A below.

(1) The State or territory has taken unilateral action to suspend, either in whole or in part, repayment of debts or payment of interest on debts to a general class of external creditors and at the relevant date the suspension has been in effect–

(2)

(a) The State or territory has entered into an agreement to reschedule or restructure its obligations as to repayment of debts, or payment of interest on debts, to external creditors and at the relevant date the agreement was entered into–

(b) The State or territory within the period of five years preceding the relevant date has refused to co-operate in a rescheduling or restructuring of its obligations as to repayment of debts, or payment of interest on debts, to external creditors and either–

(i) has imposed a limit on its performance of such obligations, without the agreement of those creditors, or

(ii) has had severe problems in performing those obligations,

so that it might have been expected to have entered into an agreement on more than one occasion to reschedule or restructure them and, if it had done so, would be likely still to have arrears of repayment or interest at the relevant date.

(3)

(a) The State or territory has entered into a further agreement to reschedule or restructure obligations as to repayment of debt to external creditors wich have already been rescheduled or restructured since January 1983 and at the relevant date the further agreement was entered into–

(b) The State or territory within the period of five years preceding the relevant date has refused to co-operate in a rescheduling or restructuring of its obligations as to repayment of debt to external creditors and either–

(i) has imposed a limit on the performance of such obligations without the agreement of those creditors, or

(ii) has had severe problems in performing those obligations,

so that it might have been expected to have entered into an agreement on more than one occasion to reschedule or restructure them and, if it had done so, would be likely still to have arrears of repayment at the relevant date.

Section 3

The B factors in the case of a State or territory, which are factors which show that the State or territory has current difficulties in meeting its obligations, and the numerical values attributable to them are those given by Table B below.

(4) The State or territory is in arrear in repaying debt, or in paying interest on debt, to one or more international financial institutions so that, in the case of the International Monetary Fund, it has been declared ineligible to draw on the general resources of that Fund as held in the General Resources Account or any account which may be substituted for it by amendment of the Articles of Agreement of that Fund or, in the case of the World Bank, the International Bank for Reconstruction and Development, the International Development Agency, the International Finance Corporation or a regional development bank, disbursement of loans to it has stopped and at the relevant date the arrears in question have existed–

(5) The State or territory is in arrear in repaying debt to external creditors other than international financial institutions, the arrears have neither been the subject of a rescheduling or restructuring agreement nor been repaid and immediately lent back to that State or territory and at the relevant date they have existed–

(6) The State or territory is in arrear in paying interest on debt to external creditors other than international financial institutions, the arrears have neither been the subject of a rescheduling or restructuring agreement nor been paid and immediately lent back to that State or territory and at the relevant date they have existed–

(7) The State or territory has entered into an agreement to reschedule or restructure its obligations as to repayment of debts, or payment of interest on debts, to external creditors generally, or with creditors which are governments of other States or territories in particular, under which–

(a) the creditors have lent further amounts to enable the State or territory to make repayments of debt which are in arrear and pay arrears of interest; or

(b) arrears of interest have been added to the amount of outstanding debt or have been paid and immediately lent back to the State or territory; or

(c) arrears in repayment of debts which have already been the subject of a rescheduling or restructuring agreement or of unrescheduled debts are rescheduled or restructured;

and at the relevant date the agreement was entered into–

Section 4

The C factors in the case of a State or territory, which are factors which provide evidence of the likelihood of that State or territory having persistent or future repayment difficulties, and the numerical values attributable to them are those given by Table C below.

(8) The interest service ratio applicable in the case of the State or territory on the basis of the figures for the latest available period, that is to say the result of dividing the total amount of interest payable for that period by the value of exports of goods and services (including interest and net transfer receipts) for the same period, expressing that result as a percentage and rounding that percentage to the nearest one tenth of one per cent., is–

(9) The number of months for which the State or territory has visible import cover at the relevant date, that is to say the result rounded to the nearest one tenth of one month of the formula

where–

A is the amount or value of the assets held by the monetary authorities of the State or territory, which may freely be used to support the exchange value of the currency of that State or territory, on the basis of the figures at the latest available date including assets which may readily be used to obtain such assets and gold valued at 75 per cent. of its price expressed in United States dollars per fine troy ounce as declared at the morning fixing in the London Bullion Market on that date; and

B is the annual value of imports of goods and services into the State or territory on the basis of the figure for the latest available period; is–

(10) The ratio between debt and gross domestic product applicable in the case of the State or territory on the basis of the figures for the latest available period, that is to say the total external debt of the State or territory at the end of that period divided by the annual total of goods produced and services provided in that period, the result being expressed as a percentage and rounded to the nearest one tenth of one percentage point, is–

(11) The ratio between debt and exports applicable in the case of the State or territory on the basis of the figures for the latest available period, that is to say the total external debt of the State or territory at the end of that period divided by the value of exports of goods and services (including interest and net transfer receipts) in that period, the result being expressed as a percentage and rounded to the nearest percentage point, is–

(12) The State or territory at the relevant date–

(a) is in breach of performance criteria which were set for it (and which have not been subsequently waived) in an agreement which it has entered into with the International Monetary Fund; or

(b) has problems in relation to its external debt of such a nature as would justify an approach to the International Monetary Fund for assistance, but it is–

(i) unwilling to do so, or

(ii) unable to do so because it is not a member of that Fund.

(13) The State or territory is expected to have in the period of twelve months following the relevant date an external financing gap, that is to say the surplus on the prospective balance of its external transactions on both current and capital account (other than those associated with the servicing of external debt) is unlikely to be sufficient to meet in full its obligations to repay debt or to pay interest on debt for that period in the absence of exceptional financing measures, such as agreement with its creditors to postpone the carrying out of its obligations, or for the provision of new loans to secure repayment of existing loans, and agreement by its creditors to reduce their claims to repayment or to interest, and accumulation of arrears, and no agreement has been reached in principle with its principal creditors to fill that gap.

(14) The price expressed as a percentage of its face value which the external debt of the State or territory might reasonably have been expected to fetch on a sale in the open market at the relevant date, is–

(15) 30 per cent. or more of the value of the exports by the State or territory of goods and services on the basis of the figures for the latest available period is represented by exports of a single primary commodity or commodity based product or by receipts from a single category of service earnings.